How do we define legal value? An interview with Geoff de Souza

From your perspective, what is the value that in-house legal teams offer the wider business? 

I think if I were to sum it up in one sentence, all in-house legal teams are there to apply legal advice to a particular business and then make decisions on legal risk in light of the risk tolerances of that particular business. However, the practical implementation of this statement varies quite a lot as that would depend on the business that is being supported, the size and shape of that business and what that business actually does. Another variable could be the composition of the legal team and what they are doing to support the business. The size of the legal department is another factor - large legal departments operate like law firms and have more resources, whereas small to medium departments have to outsource to law firms more.

Value is often associated with low cost – what are your views on this?

I think value is so much more than cost – cost is clearly one aspect of it, but to me I suppose value is essentially the USP. What is it, and more importantly, what should it be? In legal services we've seen this big shift in the last 5 years or so in the use of alternative legal service providers (ALSPs) and also legal technology. Whereas in the past law firms monopolised the provision of legal services, now we are seeing a continuum of legal services from pure risk management or advice to pure efficiency or execution. In recent times we've seen the stratification of the continuum which is why you have a lot of ALSPs that don't actually want to provide legal advice – they just want to provide execution in a very process driven, cheap and streamlined way. I think part of the challenge over the next 5 years is how that dynamic plays out, and how law firms respond to that challenge. Perhaps law firms will want to go back to just providing technical legal advice, as opposed to focusing on the volume based transactional work. Alternatively you may see a model where you have one umbrella that does almost all of those things and it is then down to the client to decide the value of going to particular legal providers, taking into account the factors of efficiency, speed, cost and risk management.

Do you think there is a need to articulate the value that in-house legal teams provide to the business? Or indeed within the legal team itself?

Definitely. I think the in-house legal team in most organisations is not a direct revenue generator so to a certain extent they are always having to justify their existence, their size and their shape. Once they can properly articulate the value that they are adding to that business, then the conversation becomes much easier. It then goes back to describing value as the USP – if the in-house legal team are the only people that could do a certain task or provide a certain outcome in terms of their decision making, then clearly they are adding value. Articulating value within the legal team itself is also extremely important. Once you define the strategy and the value of the department, then that can inform your hiring policy, the roles you want people to fulfil, career development for employees and also the future direction of that particular function.

If a legal department were to embark on an exercise to define their value, where would they start?

I think they should start with a vision of what the USP should be and what the value is that they want to add. That should be linked through to the strategic goals of the business, because if you're not helping the business achieve its aims, then there's not very much point in you being there...If you don't have those high level strategic goals, then you can also work from the bottom up and look at what work is being done, who does that legal work and how it is being managed. It is all very well having aims and goals but if you don't know how you're going to achieve them, and you don't know how far you are away from them then there is very little point in actually stating them. Part of the exercise is to gather management information and data to determine what work is being done by whom and how. In order to give in house lawyers a much more rewarding and enriching career that is aligned to the values and goals of the department and the business, it is absolutely essential to gather data.

Once you have that data it becomes a question of prioritisation -you're looking at the existing status quo and thinking can I do this any better? Which tasks are important to the wider business – and what is important to the wider business? Complexity, risk and type of task then feed into efficient work allocation amongst the legal team.

What comes first – data or strategy?

That's a tricky question, and I actually think it is much more of a continuous circle. It would be a very rare organisation if they didn't have a certain degree of data already, but what is important is the analysis of that data. So you might know your law firm spend versus last year or the year before that, but the number in and of itself doesn't go to the critical question: strategically is this what we should be doing? Were there particular reasons for why that was high or low in a given year? Without putting the data in the framework of the strategy and the value proposition of the in-house legal function, you can't really make sense of that data. Data might inform a change in strategy. For example, if you have the law firm spend number going up, it might be an indicator that there is room for improvement in the in-house control process, or that the in-house legal function is spending too much time on things that it shouldn't be prioritising, or that the business is just getting busier…

What additional value does a strong law firm relationship provide?

I think it provides a massive increase in value. I suppose the worst relationship that you can have with a law firm is sending them an ill-thought out instruction late on a Friday night and giving them an unrealistic deadline to provide documents – at a very basic human level that just doesn't work, and isn't going to get you the best service. Ideally the law firm relationship should work as a partnership. This is where the concept of value really comes in because without understanding the added value in what the in-house legal department should or shouldn’t be doing, then it becomes very difficult to say what the law firm should or shouldn't be doing. That is where I think both in-house and law firms need to be very clear on their value proposition and what value they want to add for the partnership to truly work. Then the two sides (if I can call it that!) will respect each other's space and you don't get a duplication of work - you get work being produced in the most efficient way. Now, where that gets taken to much greater degrees is when the law firm really understands the commercial drivers and strategic value that the particular piece of work provides the client, so they can tailor their advice accordingly and understand where it fits into the prioritisation of that client. Once you have that commercial partnership, then you can really widen the value pool by working on D&I initiatives, community initiatives and looking at efficiencies in how you work together. One of the things that I think is good practice, is having a wash up meeting after each big piece of work to understand in a very frank way what went well, what did not go well on both sides, and also, what could be improved for the next piece of work. If you don't have that frank communication, then neither party is any the wiser as to whether they are achieving each other's objectives, and it becomes harder for the in-house legal team to fulfil their value proposition. Communication is key!